The framework will pave the way for country-to-country trading of carbon credits wherein each credit represents a tonne of carbon dioxide either removed from the atmosphere or not emitted
COP29 failed to deliver $1.3trn climate finance to developing countries and instead promised $300bn which was highly criticised and dismissed by the poorer nations. The summit, however, was not a complete failure as it agreed on the establishment of rules that govern high integrity global carbon markets under Article 6 of the Paris Agreement.
The framework for carbon trading could direct investment to developing countries which would generate credits by investing in carbon-offseting projects like planting trees, protecting existing carbon sinks or replacing coal with clean-energy alternatives.
“Article 6 is hard to understand, but its impacts will be clear in our everyday lives. It means coal plants decommissioned, wind farms built, and forests planted. It means a new wave of investment in the developing world,” COP29 Lead Negotiator Yalchin Rafiyev said in the summit.
Article 6 provided for trusted and transparent carbon markets for the countries to collaborate and trade their carbon credits, thereby investing in more renewable sources of energy and attempting to achieve their climate goals.
The decade-long deadlock came to an end with this decision. “We have ended a decade-long wait and unlocked a critical tool for keeping 1.5 degrees in reach,” said COP29 President Mukhtar Babayev said.
This cooperation among countries is expected to reduce the cost of implementing countries’ nationally determined contributions by up to $250bn per year.
The framework will pave the way for country-to-country trading of carbon credits wherein each credit represents a tonne of carbon dioxide either removed from the atmosphere or not emitted.
Until now, these credits have mainly been traded by companies in an unregulated market. But the 2015 Paris climate deal envisaged that countries could also take part in a cross-border trade. The idea was that countries, especially the wealthy polluters, can buy carbon credits from other nations that are doing better on their own emissions-cutting targets.
The initiative included both direct country-to-country trading and a separate UN-backed marketplace.
On the opening day of COP29, negotiators agreed on a set of ground rules for setting this UN-administered market in motion.
The doubts, however, exist regarding the greenwashing of dubious clean energy projects. Concerns linger on whether the rules will ensure trades reflect real projects and how transparent and accountable the market will be.
But the agreement will boost the importance of carbon credits and could increase incentives to protect carbon sinks such as rainforests, seagrass meadows and mangroves.